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June 18, 2013

Envestnet Finds 20% Income Rise for RIAs Who Integrate Tech

Independent RIAs say more integration across their platforms is the top item to which they would dedicate their technology budget

Independent RIA practices that have integrated their technology platforms earn approximately 20% more in annual income than their counterparts at independent RIAs with no technology integration, Envestnet | Tamarac said in a white paper released on Tuesday.

The paper also found that registered investment advisors with some level of integration have almost twice the amount of assets under management as RIAs with the same size staff but no integration, totaling an average of $90 million more in client AUM.

“When asked to prioritize technology spending in areas they would like to improve, independent RIAs cite increasing the level of technology integration across their platform as the top item to which they would dedicate part of a proposed technology budget,” says the white paper, “RIA Productivity and Profitability: Integration Pays.”

The paper was produced for Envestnet | Tamarac by the independent research and advisory firm Aite Group, which conducted its online survey of 201 primary financial advisors at independent RIAs in March 2012.

Practices with integrated technology produce an average of $100,000 more in annual revenue than their counterparts with no integration, according to the paper.

“Since independent RIAs are small shops that have been built from the ground up, there is often a tendency to source technology components from vendors or acquire them from custodians, which often leads to systems that do not integrate well with one another,” said Stuart DePina (left), group president of Envestnet | Tamarac. “But advisors that use an integrated solution experience more efficient and profitable practices.”

Envestnet | Tamarac is part of Envestnet Inc., a provider of integrated web-based portfolio and client management software for independent advisors and wealth managers.

Staffs of firms with at least some technology integration were found to spend 32% less time on operation processes than the staffs at firms with no integration at all, “freeing up approximately 40 weekdays each year for every employee to engage in more revenue-generating activities, including client management and prospecting,” the white paper says.

In one of the case studies mentioned in the paper, Etesian Wealth Advisors said it adopted an integrated solution from Tamarac three years ago, and since then the firm’s client assets have grown by close to 400%, with a staff increase of only 20%.

“The fully integrated capabilities of the Tamarac applications have significantly curtailed the effort needed to complete such tasks as portfolio rebalancing and fee billing, and the firm estimates that it would have needed to add three to four full-time equivalents without its implementation of Tamarac,” the paper says.

Envestnet’s senior management in May kicked off the firm’s advisor summit in Chicago with a session on the characteristics of pioneers and visionaries, where Chairman and CEO Jud Bergman said that Envestnet wanted to “be the advisor's outfitter, porter or guide as you blaze your own path.”